When we had the idea of creating PrepLounge, my business partner and I knew that we could not afford it alone. Had we had a national (German) software company develop our website, we would definitely have needed additional seed-funding. We knew, however, that bringing investors onboard at a later stage would cost us a lot less equity. If we could somehow pay for it, we would be able to focus 100% on the product and then have a prototype running to help convince investors.

The solution we came up with was to hire a web-development company in India to get the job done for a price we could pay. However, this much lower price compared to a European or US company brings along a host of challenges. If you cannot cope with them, you’ll just be losing time and money.

Let me share with you some crucial lessons I learned – some the hard way – during over a year of outsourcing:

1.) Find the ideal website developer

Amazing crowdsourcing websites like freelancer.com or elance.com enable you to post your project so that any developer in the world can bid to complete it. Make use of these sites! To sift through the myriad of offers you’ll get, draw a decision matrix and evaluate each of them on important criteria.

In my opinion, the most important criteria should be previous references. Ask each bidder for their portfolio and write emails to the companies who hired them before. What their past clients have to say is priceless. Other relevant criteria are price, time for delivery, specific know-how, etc. There is, however, no such thing as a free meal. Beware if someone says they can complete your platform in a very short time span for next to nothing.

2.) Have design done separately

It’s hard to find good developers. Let alone good developers with good design skills. You are better off looking for a designer separately. It’s worth paying more, in case you already know a good one. Otherwise, crowdsourcing platforms specialized in design, like 99 Designs, will give you a vast array of choices. You can also use a decision matrix for your final choice.

3.) Set rigid standards and check their application

For every hour you spend now defining the rules of the game, you save 10 hours of reworking later. Address low-level concerns like code indentation and commenting but also high level tasks like daily reports and milestone deadlines.

If you don’t have a techie on your team who understands what’s coming from overseas and is able to give constructive feedback, then you should find one. Affordable developers are usually good at doing exactly what they are told to do, but don’t expect them to think out of the box and come up with a great solution for a problem that you haven’t anticipated.

Misunderstandings (remember, English is not their mother tongue) and bugs will inevitably occur. You are not going anywhere without a good ticket system.

4.) Understand your core

Some say you should not outsource your core. Sure, if you can afford to develop it internally, that’s the ideal solution. If not, instead of giving up your project, outsource it but make sure that you understand what’s being done down to the smallest details.

Understanding the technical side of your product will help you estimate how feasible the implementation of new features will be. It’s tempting to make add-ons to satisfy each improvement suggested by customers. Don’t fall into that trap!

5.) Make sure others can work on it

Don’t put the existence of your startup at stake by depending blindly on your outsourcing company. You never know, they might go bust overnight or need to relocate all their resources to a more important project.

What you get from an outsourcing company must be workable and understandable by other developers. That’s one of the reasons why point 3 is on this list. Ask for a short and comprehensive documentation of the project that will be updated as stages are completed. At some point, it is also advisable to have an independent developer audit the project and give their outsider view along with improvement suggestions.

Fernando Martinelli is a Brazilian serial entrepreneur living in Germany. His last startup, PrepLounge.com, is an innovative platform that matches candidates so that they can simulate and prepare for their case interviews. Candidates get to watch their recorded mock-interviews and understand, based on peer feedback, exactly when they did something right or wrong.

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http://twitter.com/AdamJBall Adam Ball

This is a great way to get started as a business. These days you can crowdsource most aspects of your business from finance to development. Having those overheads of more traditional employment can be risky unless you’ve gone through a round of funding. Test and validate your idea without pouring masses of resources into it in the beginning. I have to put my shamless plug in here as well but my startup Concept Cupboard is used to crowdsource design from students and grads. Hope we can be of help.

http://digitalxbridge.com Jay Melone

Good stuff, Fernando. We just published an article earlier today that expands on your #1 point, which is sometimes a challenge in itself. Would love to hear your thoughts on it.